High and Hot

A blog about the challenges of selecting, attracting, contracting and managing air service. Air service development is not as easy as "Build an Airport and the Airlines will come!" High and Hot will open a dialogue and discuss the challenges of improving small/medium community air service.

High and Hot

The Challenge of Air Service Development

Sunday, July 18, 2010

That's right...many an "Air Service Development Plan" falters because the airport to which a community is trying to attract commercial airline service to...has operational characteristics that preclude service by the aircraft and airline market they are looking to attract.

Airline guarantees, subsidies, marketing or other incentives are inconsequential to your airline service development efforts if your airport can not be flown into by the airline/aircraft your community is targeting!

Airline Operational Conditions...while often difficult to understand...can make the answer easy to a communities request for airline service when the answer is no. Airlines first and foremost are focused on providing SAFE transporation from point A to point B. If the airport has a short runway for it's elevation or obstacles that force extreme take-off or landing situations that an aircraft cannot handle then an airline won't be able to serve you. If the airline can make it in and out of an airport but has to restrict airline seats it can sell then this to can preclude an airline from coming to your community.

Airlines are commercial enterprises and as such need to earn a profit to remain in business. If the conditions drive a restriction on how many seats an airline can sell it can make the service economically unviable if the level of restriction impedes the ability to make a profit.

Aspen Colorado, (http://www.aspenairport.com/ ) in its effort to get a runway extension recently noted that the runway extension was not so much about getting new aircraft types and markets but in being able to fill in more seats on present aircraft and markets that were flying into the airport. At over 8000 feet elevation and with a 7000 foot runway in the summer particularly and from longer distances (Over 1000 Miles) the CRJ700 aircraft flying into Aspen takes seat restrictions on their flights (Particularly in the heat of summer) that jeopardize the ability of some of their flights to operate profitably. Atlanta in particular, a service they have had, is in jeopardy of not continuiing due to the seat restrictions the airport is experiencing. Even if the Aspen community were to consider revenue guarantees to continue this Atlanta service (And they are not...Aspen doesn't guarantee any service)...the seat restriction issue due to its operational challenges makes Aspen a difficult airport for the service to continue to.

Charlottesville Virginia (http://www.gocho.com/ ) is another community that is losing service due to airport operational conditions (Also runway length at the elevation of the airport). A direct flight to Detroit recently got cancelled due to a short runway. Often a 50 seat regional jet could only fill 35 seats when it was hot. Even at 640 feet elevation instead of 8000 feet like Aspen, Charlottesville experiences situations where the airport needs either more runway length or needs its aircraft to have less weight on takeoff. The airport is presently looking at an 800 foot runway extension to take care of this issue so it can try to regain service to Detroit.

So...the first question that should be asked as it regards your airport and gaining airline service should be: "What aircraft can operationally fly into our airport and from the markets we desire air service from?!" Additionally the community air service development effort should consider...does the airlines we're considering approaching about airline service have these aircraft in the markets within a range where they can safely and economically sustainably serve your community?

If the answer is no...then you need to consider other market service options or look at the airport infrastructure (Runway Length, Elevation, Obstacles etc...) and improve the conditions of the airport to expand the aircraft types and mileage ranges of these aircraft that can service your community.

I know from personal experience that some things can't be done...In Telluride we have the highest commercial airport in the United States at over 9000 feet high...we can't lower the mountain. We can look at runway length and approaches which we are doing. Additionally we're clarifying the aircraft and mileage ranges these aircraft can fly in from so that we don't waste our time pursuing aircraft that won't be able to sustainably fly into Telluride.

Recommendation: Save yourself some trouble...before getting too far down the road of airline service development...1) know what is possible aircraft and market/distance from airport-wise and 2) Focus on airlines that could provide service from those markets as targets for your air service acquisition efforts.

Thursday, June 17, 2010

I can't tell you how many times I hear from communities the statement: "Why did we lose air service with XX Airlines...the Flights were always packed?!"

THE TRUTH: The flights may have been full or close to it when the
person making the statement flew but overall the flights are often
not very full....
or

The flights were pretty full with high load factors in general but the
airlines can't go to the bank to pay their bills and hopefully make a
profit with people in seats...if not enough revenue is on the plane.

...these people in the seats also need to spend enough dollars to cover costs and have some left over for profit...butts in seats doesn't always equate to enough dollars in the bank! If you need a dollar and you get 90 cents your losing money no matter how many passengers you carry.

Very recently, Flagstaff Arizona announced that they were losing service on Horizon Airlines to Los Angeles. Unfortunately a small community losing some air service is not usually a big news item in these times of airlines reducing capacity and service. What makes this incident of note is that Horizon not a month or so before this discontinuance of service announcement had advised Flagstaff that the flights were profitable!

You may ask how can a community lose airline service when the service is profitable?! The answer is actually simple and goes to THE BIG TRUTH of Airline Service Development...
THE BIG TRUTH:

"Profit alone doesn't make community air service secure. Making a
bigger profit than if the airline used the aircraft to fly to another
community is what makes the air service secure!"

THE BIG TRUTH is exactly what Horizon shared with the Flagstaff community. Yes they were successful and the service was profitable...unfortunately for Flagstaff they were on the bottom of the profitability list of airports Horizon had service to and when Horizon was going to see a reduction in aircraft they had to cut service. Like a good business will...they will keep their most profitable ventures and cut their least profitable ventures when they have to make cuts.

You may ask why doesn't the airline just get more equipment? If the service is profitable why not get or keep enough aircraft to operate all profitable routes? Good Question but with logical answers. In an industry that has reduced capacity and thus flights to get to an overall pricing power needed to get their systems profitable...you don't just casually add or retain aircraft and flights. Those extra flights could put too many seats in the system driving down airfares and jeopardizing more of an airlines flight schedules ability to make a profit.

Additionally an additional aircraft isn't an inexpensive thing to buy...Aircraft cost tens of millions of dollars. It is a costly asset and not something purchased like a box of pens. Aircraft of the right size and type are not always available to just buy and put into your fleet. Also...if your lease is up on an aircraft it has to go unless you extend the lease and then you have to look at the costs of doing this. The extra costs of maintaining an additional aircraft type with maintenance, training etc...can move profitable route to one that is non-profitable.

What is a community to do if even when their commercial air service is profitable they can lose the service?

Airline Revenue Guarantees can help especially if the community has a sustained ability to offer risk abatements.

It turns out that Flagstaff originally offered subsidies and other start-up support to get the Horizon Los Angeles Flight in the first place. High six figure level support. Unfortunately, often, start-up cost abatements are only helpful as long as the communities funds are available. It's an old story that often the airlines will leave when these funds are depleted. Flagstaff's funds were for start-up support. If they had an ongoing program where they had a consistent funding source available...Horizon could have gone back to Flagstaff and allowed them the chance to move them up the profitability ladder via a revenue guarantee and Horizon could have cancelled another communities service instead. Knowing Flagstaff's investment for air service was short term and not a longer term support that was sustainable... Horizon cancelled the service and didn't make the call about the discontinuance of service until after the decision was made and executed.

If a community is generating a profitable service why would they even consider offering a revenue guarantee?

Because in the present environment...there are fewer aircraft available for a growing number of communities who want the air service...who want the economic development and activity that the air service can generate. Let me put it this way...IF A FLIGHT DRIVES $10 MILLION DOLLARS+ IN ECONOMIC ACTIVITY TO A COMMUNITY AND WOULD COST $200,000 IN A REVENUE GUARANTEE TO RETAIN THE AIR SERVICE I THINK A COMMUNITY WOULD BE CRAZY NOT TO FIGURE OUT HOW TO COME UP WITH THE $200,000!

Through my role as Executive Director of the Telluride Montrose Regional Air OrganizationI've pursued, obtained and supported commercial air service via revenue guarantees that have delivered a strong return on investment. I've facilitated the creation of benchmarks so that my community can determine what the ROI of an air service needs to be and what other benchmarks a community should develop to best manage an air service development program that is worthwile and drives strong community economic impacts.

Community Flights, my air service development consulting company can help communities evaluate air service development issues like revenue guarantees...how much is appropriate for how much air service etc...Small Communities in particular need to compete for the air service they can support and service they deserve...Community Flights can help facilitate a communities air service focus and develop and execute a strategy to meet the communities air service goals. VFNV9FAQDT2U

Has your community built a terrific airport facility including a modern and updated terminal or recently renovated your facilities with the expectation that getting commercial airline service should be a snap? Have you gotten your commercial airline service Yet?

If your a small or medium sized community the answer is very likely NO!

Contrary to the opinion of some...the Airline Industry and the airlines that provide flights on a commercial basis from point A to point B are NOT a Public Utility or a Not For Profit Business...Airlines operate to MAKE A PROFIT. While not always successful...and frankly very often Airlines are unsuccessful in this endeavor...MAKING A PROFIT IS THE MAIN GOAL OF AN AIRLINE NONETHELESS! If they felt your community was a shoe-in as a profitable route...well you'd likely already have the air service with them.

NO COMMUNITIES AIRPORT IS ENTITLED TO COMMERCIAL AIRLINE SERVICE JUST BECAUSE THE AIRPORT IS THERE AND THE COMMUNITY WANTS SERVICE!Has your community fervently pursued air service to no avail? If so...your not alone. In the last couple of years Hundreds of communities (Mostly Small Communities) have lost air service...many have lost all commercial airline service!

COMMUNITIES DON'T ALWAYS GET THE COMMERCIAL AIRLINE SERVICE THEY DESERVE BUT THEY CAN GET THE COMMERCIAL AIRLINE SERVICE THEY INVEST IN! THE KEY IS FIGURING OUT WHAT IS A GOOD INVESTMENT IN AIRLINE SERVICE!As it regards gaining Airline Service the questions are many:

What is a community to do to gain and sustain commercial air service or build up more air service to your community?

What are the airlines looking for when they consider whether to serve a community?

What are present industry trends and how do they impact efforts to obtain air service to small and/or medium sized communities?

Should my community get into a risk abatement program with an airline and offer a guarantee in order to obtain desired service? If yes how long should a risk abatement program go on and how should success be measured?

Air Service means critical access to the national transportation system and also provides a large amount of positive economic impacts...what are the things a small community could and/or should do to attract air service?

The above and other questions and topics will all be introduced and discussed in future High and Hot Blogs...

Why, you may be asking...is the blog titled High and Hot? Simply this reflects one of the airports I presently work to attract, develop and sustain new air service for...The Telluride Regional Airport. At over 9078 feet elevation and with a short runway this airport presents a difficult challenge as it regards attracting and developing air service. Any pilot can tell you that the laws of aviation physics are not kind at airports that are at a high elevation and with a short runway... particularly when the weather is hot. These conditions effect the weight that can successfully be carried on aircraft and severely limits the types of aircraft that can fly and from where (The distance the aircraft can fly from). Telluride being the highest elevation airport in the United States with a short runway provides severe challenges in developing commercial air service that can be successful. Because the general subject of this blog is discussing and explaining how a community might overcome the many challenges that get in the way of gaining/improving air service...High and Hot seemed like the appropriate title for this blog.

I hope to post blogs at least once a week on average not only on the main subject of commercial airline service development to small/medium communities but on other areas of the commercial airline industry including passenger tips and experiences etc...

Please feel free to link to this blog, refer others to it...forward this blog to others and most importantly jump into discussions/comments on this blog. While I am a professional working in this industry I don't claim to have all the answers. Frankly, I feel any consultant or professional who claims to have all the answers really doesn't know this industry well at all as it is a complicated quickly changing industry and there is no set path to success. There are general actions and approaches that can be taken to give your community the best chance for success but nothing in this industry is guaranteed. Like airplanes themselves...air service development is often dealing with a moving target.

scott@communityflights.com is my email address should you want to discuss air service development approaches and issues outside a public forum. I'm glad you found my blog and Happy Landings!

Community Flights

Air Service Development & Management Services

High and Hot Welcomes...

...readers and bloggers interested in the Airline Industry and specifically airline service development. The Airline Industry is rapidly changing and Scott Stewart from Community Flights:scott@communityflights.com welcomes the opportunity to discuss approaches and strategies for small/medium size community efforts to select, attract and manage new air service development.

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About Me

My name is Scott Stewart. I'm the Executive Director of the Telluride Montrose Regional Air Organization and the Managing Director of Community Flights...an airline service development and management consultant company.
As Executive Director of the Telluride Montrose Regional Air Organization I have managed an organization that has successfully selected, attracted, contracted and managed air service to the Telluride and Montrose Airports. At a time when airlines are reducing air service, particularly to small community airports TMRAO has been very successful in gaining new air service and maximizing economic activity as generated by our regions airports. AS of 2008 CDOT Economic Activity Study the Telluride and Montrose Airports generated over $470 Million Dollars in total economic activity.